Searching for ways to cut US jobless rate
Washington — Millions of Americans - some young and unskilled, others older and highly skilled - are likely to remain jobless for years to come.
That prediction comes from Martin Feldstein, President Reagan's chief economic adviser, who says it will take five or six years to bring the unemployment rate - now 10.4 percent - down to 6 or 7 percent.
What can the United States do to cope with that likelihood?
This searing national problem intrudes, and will continue to intrude, upon all the economic policy that the White House and Congress are settling down to write.
Experts at both ends of Pennsylvania Avenue agree on basic assumptions:
* Whatever is done should not be allowed to reignite inflation, if this is possible to prevent. A fresh burst of inflation would undo years of painful struggle to bring rising prices under control.
* The residual unemployment problem, even after economic recovery takes place , will center on millions of people who are ''structurally'' unemployed.
Such people, experts stress, are not likely to find meaningful work even in a brisk economy, unless special training and retraining programs are devised.
Dr. Feldstein divides the ''structurally'' unemployed into two major groups. One comprises young people, making the transition from school to work.
''Forty percent of Americans now unemployed,'' Feldstein told reporters at breakfast this week, ''are under 25 years of age. Half of them are teen-agers.''
Typically, he adds, this group is not ''chronically unemployed.'' They find jobs - but of a temporary, dead-end nature.
''The critical thing,'' says the chairman of the Council of Economic Advisers , ''is to improve that transition so as to create good jobs.'' This involves training.
The second major group Dr. Feldstein cites is the ''long-term unemployed,'' often highly skilled workers from shrinking industries such as autos, steel, and textiles.
''Two-thirds of all people now unemployed,'' says Feldstein, ''find jobs within 15 weeks.'' But this is not true of workers from troubled industries, often battered by import competition.
Such industries, even when modernized, are unlikely to employ as many workers as before.
People laid off in this category are victims of what a top US banker calls the ''transition from smokestack America to information-flow America.''
By this he means that two-thirds of American jobs are now in the service sector - including increasingly the processing and transmission of information - and only one-third in manufacturing.
To reemploy people who have lost ''smokestack'' jobs requires retraining, not the basic training needed by the young.
Within the Reagan administration, says Feldstein, ''we are somewhere beyond midstream'' in thinking through programs specifically designed to help the structurally unemployed.
A beginning was made in the Job Training Partnership Act of 1982, which provides federal funds - transmitted through states to local entities - for training, especially of disadvantaged young people. Some money also can be spent for retraining people laid off in what are called ''contracting,'' or declining, industries.
Private Industry Councils, based on a partnership between business and local government, are foreseen as the training agencies.
Public works programs of the kind now being discussed in the lame-duck session of Congress are rejected by White House officials as inapplicable to the needs of the structurally unemployed.
Jobs created by such programs in the past, a senior White House official says , ''take a year or 18 months to take effect'' and seldom result in permanent private-sector jobs.
With US factories producing at less than 70 percent of capacity, analysts agree, no programs devised by government will cut the structurally unemployed rolls by much. Only when recovery comes and the nation's plants build up toward peak capacity can ''real'' new jobs appear.
Yet Feldstein, along with many private economists, cautions about inflationary dangers inherent in too strong a recovery.
''It is important,'' he says, ''not to have an excessive rate of growth or you will boost inflation.''
Feldstein sees growing budget deficits as a threat to efforts designed to improve the lot of the structurally unemployed.
''When the government borrows 4 to 5 percent of the nation's gross national product (to finance the deficit),'' he says, ''in a country where the private savings rate is (only) 7 percent of GNP, the effect inevitably is to raise long-term interest rates.''
High interest rates, as Americans have learned, stifle economic growth and stunt the economy's ability to create new jobs, especially in the export sector.
''Deficits push up real interest rates,'' says Feldstein. ''This causes the dollar to grow stronger.''
A strong dollar makes foreign goods comparatively cheaper for Americans to buy, so imports swell.
Exports of US goods decline, because they become more expensive for people in other countries to buy.
This year's huge US trade deficit, analysts say, may double in 1983 to $70 billion or $80 billion, roughly 2 percent of the GNP. The result will be fewer jobs in export industries, which in good times furnish 1 out of every 6 or 7 manufacturing jobs in the US.